India’s Government May Postpone $3 Bln Coal India Share Sale to Next Fiscal Year

By Rajesh Roy

NEW DELHI–India’s government may postpone a $3 billion share sale in state-run Coal India Ltd. to the next fiscal year starting April due to unfavorable market conditions, a top official said, a move that could add pressure on its already-weak finances.

“There will be no distress sale [of government stake],” the official with direct knowledge of the matter said late Tuesday. “If we don’t get the right price, we may not sell the government’s shareholding in Coal India this financial year,” the official, who asked not to be named, added.

The government, which currently owns 78.65% of Coal India, plans to sell a 10% ownership in the country’s top coal miner and has already selected five bankers–Axis Capital Ltd., Kotak Mahindra Capital Company Ltd., SBI Capital Markets Ltd., J.M. Financial Institutional Securities Ltd. and ICICI Securities Ltd.–to manage the sale.

But with stock markets falling, in particular stocks in metals and mining companies due to the sharp decline in global commodity prices, New Delhi may choose to wait to push forward with its stake sale plan.

The Coal India stake sale is crucial as it could help the government raise almost a third of the total $10.4 billion revenue that it has budgeted under its disinvestment plan for the current fiscal year, a target that now looks likely to be missed by a wide margin.

The government has so far managed to raise just 127 billion rupees ($1.9 billion) under the plan. Lower revenue would strain the government’s financial position that is expected to face fresh pressure next year when an increase in salaries of government employees and pensioners comes into effect.

“The disinvestment target for this [fiscal] year is set to be missed,” the official said. “But that doesn’t mean we will sell government’s shares at throw away prices,” the official added.

Coal Secretary Anil Swarup said that Coal India’s fundamentals are “strong,” suggesting it would fetch a high price if the stake is sold. However, a final decision on the sale will be taken by the finance ministry, he said.

“Coal India’s performance has improved on all parameters be it production, acquiring land for projects, getting environmental clearances or rake movements for transportation of coal,” said Mr. Swarup.

A senior official at the Finance Ministry’s Disinvestment Department, which manages such stake sales, declined to comment, saying he wasn’t authorized to disclose market-sensitive information.

A Coal India spokesperson also declined to comment.

Write to Rajesh Roy at rajesh.roy@wsj.com

Breaking the story

Rajesh Roy was first to report that India’s government may postpone a $3 billion share sale in state-run Coal India Ltd. to the next fiscal year starting April due to unfavorable market conditions, according to a government official.

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